Since BRICS has been the talk of the town for the past few weeks I wanted to take a dive into it and show you what I see. Will it dominate the global economy like Goldman Sachs though it would in 2001 or is it just a big nothing burger?
Origin Story
BRICS is a group of five countries - Brazil, Russia, India, China, and South Africa. The idea of BRICS initially “BRIC” started in 2001 when an American investment bank Goldman Sachs was trying to identify emerging markets and wrote a report saying these countries would dominate the global economy by 2050. Goldman put a battery in their back and they decided to actually form some kind of alliance in 2009 to (maybe) achieve that goal.
OK, So What Do They Do Exactly?
They have a summit where they meet annually, economic cooperation, and they have a bank called New Development Bank, also known as the BRICS Bank. They approve and disburse loans for various projects in member countries. For example BRICS bank lent India $500 million for a railroad project.
The New Development Bank, is funded through contributions from its member countries. Each member country contributed an agreed-upon amount of capital to the bank, which formed the bank's initial capital. Every member has one vote and no one has veto power. This idea seems to be inspired by the IMF, the bank of the United Nations.
Are They Taking Over The World?
Countries getting together and helping each other out is always a good thing but going as far as saying they’ll take over the world is a stretch. Let’s breakdown BRICS by economic and military strength.
GDP (2021)
Brazil: $1.6 T (7k per capita)
Russia: $1.7 T (12K per capita)
India: $3.1 T (2k per capita)
China: $17.7 T (12k per capita) <bigger grain of salt>
South Africa: $419 B (7k per capita)
People have unfairly criticized me in the past for looking at GDP. They say it doesn’t account for everything, which is correct. But in these situations I don’t care, I’m not using it to measure citizens wellbeing. I’m measuring market output, and GDP does just that.
The United States alone has a GDP of $23.3 trillion (70k per capita), that’s almost all of BRICS combined with only a population of 331 million. So BRICS needs a couple of decades to work on that front, and with Russia currently bashing their head into Ukraine, add a few more years.
Wars are extremely expensive.
Yuan Takeover?
The Chinese didn’t build the Yuan to be a reserve currency, that was not their goal. The Yuan has strict capital controls. The Yuan can’t freely flow in and out of the country. China is a manufacturing heavy country, it’s almost 40% of their economy. For their products to be attractive to foreign buyers it has to be cheap. So they pegged their currency to keep the Yuan price artificially low. People count on China for cheap labor, if the Yuan goes up in price it’ll be bad for their economy, they’re not very diversified.
Chinese people are constantly trying to convert their RMB wealth into foreign assets because they don’t trust the Chinese system. If all of a sudden China removes their capital controls and unpeg the currency they would have a crazy capital flight crisis.
Sorry, I just don’t see them doing any of this, but I have overestimated people before.
Military Spending and Power Projection
Brazil: $19.19B
Russia: $65.9B
India: $76.6B
China: $293B
South Africa: $3.27B
Military spending alone doesn’t account for how good you are at fighting and how well you maintain your equipment, but it accounts for what you have to work with and that’s all we need.
Again, the US alone has a budget of $801B, double the spending of BRICS. If you start including NATO even without other allies like Japan it’s overkill. US and Japan have a Mutual Security Treaty, Japan has one of the most powerful Navies in the world.
I’m not saying BRICS has to top NATO and Japan to become economic power houses but if they want that multipolar world they talk about. They at least need to be able to constantly patrol all of their trade routes. For that you would need a big blue water navy and lots of foreign bases and friendly ports, these guys are lacking.
In this article I didn’t even get into the India and China border fights and China’s past untrustworthiness on the global stage. Things and behaviors that could potentially undermine their BRICS relationships. I also didn’t even get into culture exports.
If BRICS want to actually create their own system they need years and years of work. It’s not just about having meetings and running your mouth. You need to put your economies into overdrive, competent modern militaries, innovation, relationships built on trust and more. These things take decades and these guys are jumping the gun.
When I see BRICS all I see is a school kid (China) standing next to a bunch of degenerate friends his mom told him not to hang out with.
As a person from one of the "degenerate friends" ... this pretty much sums up the status quo. Gas/oil block finds off Namibia/South Africa coast could change things, but the big dogs aren't our competition.